Tax delinquents got stimulus funds
Thousands of companies receiving funds owed $757 million
WASHINGTON – Thousands of companies that cashed in on President Barack Obama’s economic stimulus package owed the government millions in unpaid taxes, congressional investigators have found.
The Government Accountability Office, in a report being released today, said at least 3,700 government contractors and nonprofit organizations that received more than $24 billion from the stimulus effort owed $757 million in back taxes as of Sept. 30, 2009, the end of the budget year.
The report said the tax delinquents accounted for nearly 6 percent of the 63,000 contractors and grantees examined and cautioned that the real number might be higher because the known tax debt does not measure such factors as income underreporting.
Among the examples was an engineering firm that received a $100,000 stimulus act contract but owed $6 million in taxes. The IRS called it “an extreme case of noncompliance.” A social services nonprofit that received more than $1 million in stimulus funds owed taxes of $2 million.
The GAO referred those two cases and 13 others to the IRS for further investigation.
A Senate Homeland Security and Governmental Affairs subcommittee will hold a hearing today on the report.
Federal law does not prohibit tax delinquents from getting government contracts or grants, though there are provisions that enable the government to withhold payments in some cases. While the federal government requires contractors to present documentation that their taxes are paid, some recipients escaped federal review because the money was disbursed at state or local levels.
“It is a matter of basic fairness that those who take government money should be required to pay their taxes like everyone else,” said Sen. Tom Coburn of Oklahoma, the panel’s top Republican. “That such a huge amount of the stimulus money went to known tax cheats should be a wakeup call for Congress.”’